A Bit Too Much

Other kids’ games are all such a bore!

They’ve gotta have rules and they gotta keep score!

Calvinball is better by far!

It’s never the same! It’s always bizarre!

— Excerpt from the Calvinball theme song

For reasons known only to Calvin and his anthropomorphic buddy Hobbes, cartoonist Bill Watterson concluded his popular cartoon strip back in 1995. Too bad. We suspect that a six-year old boy a little too intelligent for his own good and his sardonic stuffed tiger would’ve loved the virtual currency known as bitcoin.

Bitcoins are created as a reward in a competition in which users offer their computing power to verify and record bitcoin transactions

By way of crypto-reminder, bitcoins are a decentralized digital currency invented by an unknown programmer, introduced to an unknown mailing list, and released as an unknown-source software. Today, the mysterious payment system has become one of the world’s hottest assets, at least on the so-called darknet market, its ethereal market value said to have shot up a gazillion percent or so last year.

“Miners” keep the blockchain consistent, complete, and unalterable by repeatedly verifying and collecting newly broadcast transactions into a new group of transactions called a block

Whatever it’s done, the cryptocurrency ​is assuredly volatile, its price gyrating insanely as computer hackers steal bitcoins while buyers and sellers transmogrify in and out of the market. Naturally, this virtual payment system is now being touted as an adventurous way to invest for retirement. Indeed, California-based Bitcoin IRA is offering retirement accounts that can somehow provide direct ownership interests in bitcoin. And for just a modest 15% upfront set-up charge, payable in actual dollars.

Hierarchical deterministic “wallets” generate pseudorandom “rolling addresses” for every transaction from a single seed

According to the firm’s chief strategist, all retirement investors should take a look at bitcoin because its enigmatic price is uncorrelated. To just about everything in the real world, apparently. From where we sit, Calvinball makes more sense.

What the markets have been doing…

Hopes for stronger earnings growth ahead combined with earnings reports from early fourth-quarter to push markets higher across the two-week stretch. At period’s end, analysts were predicting an overall year-over-year increase in fourth-quarter earnings for the S&P 500 of 3.2%, slightly higher than the previous quarter. Among the benchmark indexes the technology-heavy NASDAQ performed best and reached record highs. Among the sectors, Financials, which have fared best since the election, started off on a weak note but received a boost from decent bank earnings.

On the economic front, retail sales rose a solid 0.6% in December, with gains concentrated in autos, furniture, and online sales. The news was particularly welcome following lousy news from Macy’s and Sears, both of whom announced major store closings. The University of Michigan’s gauge of consumer sentiment unexpectedly ticked lower but remained near its highest level since the financial crisis.

Index

Friday’s Close

Two-Week Point Change

Year-to-Date Change

DJIA

19885.73

+123.13

+0.62%

S&P 500

2274.64

+16.57

+1.60%

NASDAQ

5574.12

+191.00

+3.55%

Intermediate- and long-term Treasuries went sideways across the period, though a 10-year auction attracted good demand. The investment-grade corporate bond market nicely absorbed a heavy dose of new issuance, while high yield volumes remained below average, due in part to a quiet issuance calendar. Municipal bonds outperformed Treasuries, as coupon reinvestments continued to support the market. Strong inflows and oversubscribed deals look to continue at least until the new issuance calendar catches up to investor demand.

Fixed Income

Yield

Two-Week Yield Change

2-Year Treasury

1.19%

NC

10-Year Treasury

2.40%

-0.04%

30-Year Treasury

2.99%

-0.08%

30-Year Municipals

2.95%

-0.13%

Quote of the Week…

“At the end of the day, Property Assessed Clean Energy (lending) is an unregulated industry, and it’s just a matter of time before we get regulated.”

Number of the Week…

The approximate amount that billionaire hedge-fund manager George Soros lost as a result of the stock-market rally spurred by Donald Trump’s surprise presidential election

What Fund Architects has been doing…

After taking a bit of a breather at the end of December, U.S. equities have bounced back this month. The same factors that drove prices post-Election – enthusiasm over the President-elect’s legislative agenda and stronger economic data – gave a nice boost to the overweight to U.S. Large Cap stocks we added first of the month and Global Industrials we’ve held since November.

Not unexpectedly, the fixed income markets have done little so far this year. In this environment, we’re pleased with our exposure to Bank Loans and High Yield bonds. Both positions have relatively high interest payments and lower exposure to interest rate movements compared to their fixed income counterparts.

While the political backdrop adds a little uncertainty to the markets on a day-to-day basis, it will have little, if any, impact on our investment process. Our rankings continue to suggest that the fundamentals of improving corporate profits and better nominal growth make stocks – U.S. stocks in particular – the place to be for added performance.

The views in this commentary are those of Fund Architects. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this commentary, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any discussion or information provided here serves as the receipt of, or as a substitute for, personalized investment advice from Fund Architects or any other investment professional. The information contained within this commentary should not be the sole determining factor for making investment decisions. To the extent that you have any questions regarding the applicability of any specific issue discussed to your individual situation, you are encouraged to consult with Fund Architects. Information pertaining to Fund Architects advisory operations, services, and fees is set forth in Fund Architect current disclosure statement, a copy of which is available upon request. Fund Architects, LLC is an SEC Registered Investment Advisory Firm.